Samsung Gives First-Ever Earnings Warning as Semiconductor Troubles Mount

Samsung Gives First-Ever Earnings Warning as Semiconductor Troubles Mount

Samsung warned that it would miss Q1 earnings expectations today in the first such message the company has ever issued. It’s a warning sign for tech stocks and the semiconductor segment, plus a sign that the next few weeks aren’t going to be happy ones.

Previously, Samsung was expected to report a 7.2 trillion won ($6.4B) operating profit for January through March. That’s already a decline of more than 50 percent compared with the firm’s results from a year ago. The company’s warning was terse, stating only that “The company expects the scope of price declines in main memory chip products to be larger than expected,” but that’s significant in and of itself.

Samsung’s memory business is under heavy pressure from declines in the DRAM and NAND market. After a burst of data center building last year, a number of semiconductor firms have predicted a relatively weak first half. But Samsung is hit coming and going by these kinds of problems. It counts companies like Apple among its major display customers, which means any slowdown in iPhone demand will hit that business. Its memory business is similarly exposed. DRAM prices are in freefall and NAND prices have dropped significantly.

Graph and data by DRAMeXchange
Graph and data by DRAMeXchange

On top of these concerns, Samsung and other semiconductor companies face uncertainty over ongoing US-China trade tensions and concerns about a weak Chinese economy. The issues aren’t unique to Samsung; Micron also warned on earnings last week. Memory manufacturers are in for a rough ride over the next 12 months as new foundry capacity comes online and the capacity concerns that shaped the last few years ease, at least temporarily.

Right now, a number of companies have forecast a weak first half to 2019, with sales recovering in the second half of the year. There’s some reason to hope this will happen — AMD’s new 7nm Epyc and Ryzen CPUs and Intel’s Cascade Lake AP will both be available in H2, offering a significant increase in CPU core counts to customers of both companies. AMD’s Navi GPU should also be available, along with the usual iPhone product refreshes, which always boost Apple sales in the back half of the year. Windows 7 will also be roughly six months away from retirement by that point, which may boost corporate refresh cycles as well.

We wouldn’t expect to see anyone making robust predictions about demand in the back half of the year, but how companies update their 2019 guidance will give some indication of what to expect. If Samsung, Micron, Intel, and other firms stick to their predictions of a recovery, we could see things rebound fairly quickly. If they start pushing back the anticipated return to growth, it could mean things will get worse before they get better.

A resolution to the ongoing US-China trade war would provide a confidence boost, but a quick deal is not expected. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to China on Thursday to meet with a Chinese delegation to resume talks. Bloomberg has already suggested that the Chinese may import a record amount of US pork to end the trade war. Chinese pork production has been down sharply after an outbreak of African swine fever.

Solving diplomatic dust-ups with the power of cardiovascular disease!
Solving diplomatic dust-ups with the power of cardiovascular disease!

A desire to maintain a constant, steady supply of bacon may wind up helping to resolve a trade dispute that’s dragging down overall performance of the semiconductor market. This is either a further sign of the End Times or a fuzzy, heartwarming tale about finding our common humanity in a mutual love of pork products. I’m not sure I can tell the difference anymore.

Continue reading

Intel’s Raja Koduri to Present at Samsung Foundry’s Upcoming Conference
Intel’s Raja Koduri to Present at Samsung Foundry’s Upcoming Conference

Intel's Raja Koduri will speak at a Samsung foundry event this week — and that's not something that would happen if Intel didn't have something to say.

Samsung, Stanford Built a 10,000 PPI Display That Could Revolutionize VR, AR
Samsung, Stanford Built a 10,000 PPI Display That Could Revolutionize VR, AR

Ask anyone who has spent more than a few minutes inside a VR headset, and they'll mention the screen door effect. This could eliminate it for good.

Report: Samsung May Kill Galaxy Note Series, Add Stylus to Galaxy Z Fold3
Report: Samsung May Kill Galaxy Note Series, Add Stylus to Galaxy Z Fold3

Samsung may be planning a major shift in its smartphone strategy in 2021. According to a recent analyst report, Samsung may drop the popular Galaxy Note family in favor of a foldable with a stylus. The problem, it seems, is that the Note series isn't as popular as it once was.

Samsung Starts Rolling Out Galaxy S20 Android 11 Update on Verizon
Samsung Starts Rolling Out Galaxy S20 Android 11 Update on Verizon

Not only does this include the Googley Android 11 enhancements, but it also has numerous Samsung-specific changes as part of the One UI 3.0 revamp.